Confused about home loan pre-approvals? Here’s everything you need to know before you start house hunting.
What information do you need?
First, your broker will want to build a comprehensive picture of your finances. To do this, you’ll need to provide evidence of everything including:
- Pay slips and tax returns for your income.
- Title deeds for tangible assets (i.e. physical items such as buildings, machinery and inventory), and
- Portfolio statements for intangible assets (non-physical items such as copyrights and patents).
- Loan statements for existing loans.
- Credit card statements showing your credit limit.
- Other financial obligations.
What happens at your first appointment?
At this initial appointment, your broker will confirm your identity and use your information to calculate an approximate borrowing figure. During this appointment, you’ll need to fill in a pre-approval application form.
How do you get approval?
Once you’ve chosen the mortgage, your broker will perform a credit check. The result of the credit check helps the lender determine whether you’re a suitable borrower and how much they should lend you.
When do you get approval?
Once the lender approves your application, you’ll receive a conditional approval certificate from the lender that is usually valid for 90 days. It’s important to remember that this is not approval for the actual loan. Use this figure to work out how much you can spend on a property, taking into account the size of your deposit and other expenses such as conveyancing fees, Stamp Duty and so on. Securing pre-approval will allow you to house-hunt with confidence.
What happens next?
When you’ve found the perfect property and you’re ready to make an offer, remember to tick ‘subject to finance approval’ on your offer before contacting your lender or mortgage broker to finalise the application process.
Source: Purely Finance Autumn Newsletter 2017